Too risky, too high profile and too time consuming

Feb 01 2004 by Brian Amble Print This Article

Directors are increasingly reluctant about becoming Non Executives, according to a new report, believing that the job has become too risky, too high profile and too time consuming.

The third annual Ernst & Young Corporate Governance survey found that four out of ten respondents were less willing to take up a Non-Executive role now than they would have been 12 months ago.

The research, carried out amongst board members of the UK's leading 500 companies, found that while almost three quarters supported the broad thrust of the Higgs Report on the responsibilities of Directors, the new rules it inspired had also made the role of a Non Executive less attractive.

As one respondent put it, "the risk and reward equations have now become unbalanced.

ďThe environment has changed and being a Non-Executive Director has become a lot more time consuming and a lot more personally risky."

The average pay for Non Executives in a large UK company is around £35,000. But many believe that the responsibilities of the role make it so much more time consuming that it deserves more generous remuneration.

But despite such drawbacks, Ernst & Young also found that 17 per cent of respondents were now more likely to take up the role of non-executive director, mainly for career development opportunities.

The Higgs Report, published a year ago in the wake of the corporate disasters such as Enron and Worldcom, recommended an enhanced role for Non-Executive Directors that included greater accountability for the behaviour and financial reporting of their companies.

Gerald Russell, Ernst & Young's managing partner in London and Co-chairman of the Independent Director Initiative, said: "This survey should ring some alarm bells.

"At a time of intense scrutiny of the Corporate Governance process, and when more than ever we need high quality Non-Executive Directors, it is clear that many experienced candidates are getting increasingly nervous about the risks associated with the role. These are now seen as far outweighing the rewards."